When Steve Kroft asked his target, President Obama, what was wrong with the idea of paying bonuses in the tens of millions of dollars to the “best and brightest” of the financial industry, the President’s response was that they need to get away from Wall Street once in a while and learn about life in places like Iowa. 

Speaking about discussions on limiting executive compensation and bonuses and how firms fear they might lose top talent due to lower pay, the president said, “I’ve told them directly, ’cause I’ve heard some of this. They need to spend a little time outside of New York. Because you know, if you go to North Dakota, or you go to Iowa, or you go to Arkansas, where folks would be thrilled to be making $75,000 a year without a bonus, then I think they’d get a sense of why people are frustrated.

Now I’m not the President of the United States, no less much of anything else, but that answer didn’t blow me away.  What difference does it make what folks in Arkansas think?  And, I note that the Walton’s might take issue with the President’s view.  Wall Street bonus babies aren’t seeking the approval of midwest middle managers, even if they knew they existed.

Their world isn’t quite as small as the downtown financial center.  Oh no, it extends all the way east to the Hamptons, then north to Greenwich.  But that’s where it ends.  It’s not quite a small group of people, but it’s not very large either.  It’s a bunch of men and women who operate in a shockingly small pond, and their only goal in that pond is to get one thin dime more than the next guy.  When you’re in that league, that’s the name of the game.

But one supposition seems to have gone largely unchallenged, even by our former lawprof President. 
The point was broached when he said that it was one thing when an investment banker made 20 times the income of a school teacher, but was 200 times really necessary?  But he never finished the thought.

The knee-jerk mantra of the financial sector is that they have to pay these astronomical amounts to their “best and brightest” (this was the specific phrased used by our Prez on 60 Minutes, the Lawrence Welk of news magazines) or risk losing them to some hedge fund.

Who?  Is there some hedge fund out there so flush with cash that it’s prepared to throw tens of millions in bonuses to every dissatisfied bonus baby on Wall Street?  Can they absurd the 10,000 investment bankers, highly skilled at drinking three cocktails while retaining the ability to deliver the perfect punchline to amuse the table.

I know a lot of these guys.  A few are quite bright.  Some are thick as a brick.  Some just have the right rep tie.  And many are currently unemployed.  Their hedge funds went belly up.  Their investment houses went under.  They are sitting at home waiting for the phone to ring with the offer of a $10 million retention bonus.  The phones are silent. 

The truth is that they weren’t really stars in the first place, but people fortunate enough to have gotten into investment banking at a time when most of us had never even heard of such a job.  They lunched, they drank, they stuck around long enough to make some friends, and they prospered.  They prospered in ways that the rest of us can only imagine.  But what they are not is in demand. 

Seth Godin, coincidentally, discusses the compensation issue as well.

After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can’t eat more meals in a day or wear more shoes. What matters to the manager is the relative amount. How much more would I make over there? Why does that company pay its CEO more than my company pays me?

Exactly.  Once one hits the upper echelons, it’s all score keeping.  It’s about where one stands in the pecking order of the wealthy.  It has nothing to do, as our President wrongly assumed, with how much salary is necessary to maintain a lifestyle, and even less with the need or retention.  It’s a compensation system out of control, and one in which all the decision-makers are vested.  After all, if you can’t give your stars $10 million bonuses, how can you justify the $20 million bonus that the board has just given you?

So let’s cut the malarkey and bust the myth.  No one needs to pay investment bankers, or CEOs, anywhere near what they have been getting for the past decade and more to keep them in the job, regardless of whether they did a great job or, as is true of most of them, they stunk up the place.  It’s not like they have anywhere else to go. 

Trust me, they will be happy to stay put for a tenth of what they were getting, because there isn’t a chance in the world that they could live with the alternative, actually working for a living for an ordinary income like the rest of us.